In the dedication of the book “The Compound Effect,” Darren Hardy quotes his mentor Jim Rohn, “Talk about things that matter to people who care.”
As I write this article, I know that there will be many readers that don’t care. But they should!
With rates rising, and
1) Their loans arent closing on time, if it all, and when they do close, it’s late and it’s ugly.
2) The company’s rates and fees are too high.
3) The company provides little or no support or training.
Oh, and one more thing; they need at least 130 to 140 basis points at a minimum and all the way up to 200 bps compensation plans, because that is what they are getting paid now.
Whenever I hear that part about the comp plan, I ask them; “If that is what you are getting paid now, why do you want to leave”?
They always answer the same way: “My loans don’t close on time, our prices are too high, and there is no support.”
Am I on camera? Is this an episode of Punk’d? I keep expecting Ashton Kutcher to walk in.
Do the math people. One plus one does not equal five, it equals two!
What no one bothers to explain to loan officers is the economics of running a retail mortgage banking branch or company, so, let me try.
A quality operations staff is not cheap. I emphasize quality because that is what it takes to close your loans on time.
Everyone from the file opener all the way through the shipping and post-closing team needs to be good at their jobs and they need to be fairly compensated for the work they do. After all, if your loans close on time without drama and stress isn’t it that much easier to pick up new referral relationships, and repeat and referral business from every client?
And if you work for a well-run branch, they have invested heavily in staff and systems development to deliver an exceptional experience for you the loan officer and your customers as well as your borrower and the referral partner. Again, that investment is expensive, it takes time, and it requires profit for future development.
Let’s talk about pricing. A competitive price is directly tied to your compensation package. You want to make 150-200 bps? Go ahead and start there, then add in every conceivable expense you can imagine, and then add in something for profit, which is required if you would like to company to keep its doors open. Banging on your company to make higher basis points in commissions, and complaining about how high rates and fees are simply makes no sense.
You want support? Support means “staff”, and staff costs money. You want excellent support? It requires excellent staff, and they deserve to be paid accordingly.
So, here is a Business 101 lesson: All businesses regardless of the industry must strike a profitable balance between costs and margins. And “commission paid” is a cost of sales. If costs of sales rise, all companies have four choices available to them:
1. Do nothing. This company will eventually fail, as expenses are greater than revenue.
2. Raise prices. It can work as long as the sales team can sell value. But if the loan officers are selling price, it won’t work. They require training to sell value. Training costs money.
3. Cut expenses. Read any headlines lately about layoffs? Cutting support staff is how you reduce service levels. Loans start to close late and ugly, and we are back where we started.
4. Increase volume. This works, but only if done intelligently. Companies desperate for production start taking shortcuts and making concessions, and they recruit without doing due diligence. This always leads to a failure of culture. Soon the best performers at that company begin to leave, and the service and production always suffer.
I’m not sure who is more to blame for this: the owners and branch managers or the loan officers that are playing this silly game.
So, let me try to help those unsuspecting loan officers with this simple explanation: 1+1=2.
Companies and branches require profit to stay in business. They are not supposed to just break even, or lose money. Loan officers, if you are considering making a move, instead of leading with your comp plan, find a company that is committed to profitability, with an excellent support staff and has developed a system dedicated to serving both the loan officer and your customers, so that you can build a career worth having at a company worth working for.
Here is my last math lesson. Getting the highest possible comp plan for loans you don’t get because prices are too high, or on loans that never close equals $0.00. And that is the only math that matters.
Dave Gallegos is a branch manager for Fairway Independent Mortgage Corp. He is a 16 year industry veteran who owns and operates offices in the Denver Metro Area. You can contact Dave via e-mail at daveg@fairwaymc.com, or 303-347-7575.
